Mozambique gas project to proceed despite withdrawal of UK funding
The TotalEnergies project will receive alternative funding to replace Dutch and UK support.
In the original agreement in 2020, Mozambique LNG concluded a project financing US$15.4bln, with a group of approximately 30 lenders including Export Credit Agencies and commercial banks.
A statement given to the House of Commons and the House of Lords by Peter Kyle, Secretary of State for Department for Business and Trade said, ‘After a detailed review, the UK Government has decided to end UK Export Finance’s (UKEF) participation in the project.’
He cited safety as a key driver for the decision, with an evaluation of the risks around the project leading to the statement, ‘It is the view of His Majesty’s Government that these risks have increased since 2020. This view is based on a comprehensive assessment of the project and the interests of UK taxpayers, which are best served by ending our participation in the project at this time. Whilst these decisions are never easy, the government believes that UK financing of this project will not advance the interests of our country.
‘UKEF has over 100 years’ track record as a reliable financing partner in support of UK exports and exporters. The decision to end participation in Mozambique LNG at this time is specific to this project and made with the agreement of the project sponsors and other participants. UK Export Finance will reimburse the project for the premium paid, reflecting the end of the department’s risk exposure to the project.
‘The government remains committed to backing British exporters, including through support from UKEF, as we have set out in our Industrial and Trade Strategies. We also remain committed to our national partnership with Mozambique and building long-term respectful relationships with African countries to boost sustainable growth, tackle the climate crisis and address insecurity.’
Following withdrawal of support from UKEF and the Dutch firm Atradius, the Mozambique LNG partners have agreed to provide additional equity to replace the UKEF and Atradius contributions, representing in aggregate approximately 10% of the external financing.
TotalEnergies state that because of ‘the prolonged force majeure period, Mozambique LNG has negotiated with the lenders an amended financing agreement in order to align the documentation with the updated project schedule.
‘After the lifting of force majeure by Mozambique LNG, and the will of the consortium to resume the project, Mozambique LNG partners decided to proceed without the participation of UKEF and Atradius since these two Export Credit Agencies had not yet reconfirmed their commitment.’
TotalEnergies states it ‘has taken note of the reports commissioned by the Ministry of Finance of the Netherlands from external advisors Clingendael and Pangea Risk regarding the human rights and security situation in Cabo Delgado, which were published on 1 December, despite the fact that Atradius is no longer part of the financing.
'TotalEnergies regrets that both external advisors did not travel to Mozambique and conduct on-the-ground investigations by themselves, but produced a report relying mainly on information collected through third parties.’
TotalEnergies thanked ‘the lenders representing around 90% of the external financing who have confirmed their commitment to the financing of the project, acknowledging its positive contribution to the development of Mozambique’.
